First Niagara sells mortgage-backed securities, pays-off debt

July 1, 2012

BUFFALO - First Niagara Financial Group, Inc. recently announced that it has taken steps to reposition its securities portfolio through the sale of $3.1 billion of mortgage-backed securities (MBS), the proceeds of which were used to repay a comparable amount of short-term debt.

The company expects that these actions will improve overall earnings quality and consistency by reducing the impact of prepayments on the MBS portfolio yield and net interest margin, as well as further strengthen key financial metrics. Based on the actions completed, the company will recognize a $16 million pre-tax gain from the sale of securities in the second quarter. There were no prepayment penalties on the debt pay-offs.

"The operating performance of our company -- with industry-leading strength in our commercial franchise supported by tremendous momentum on the retail side - is better than ever with the successful completion of the HSBC branch transaction," John R. Koelmel, First Niagara President and Chief Executive Officer, said. "Given the expected duration of this historically low rate and volatile economic environment, we took decisive actions to better position our balance sheet without impacting the longer-term business fundamentals and to shine a brighter light on the strength of our core operations."

"The selection and sale of securities with the greatest levels of prepayment risk coupled with the deleveraging have better positioned us to benefit when interest rates ultimately rise. At the same time, we have also significantly reduced the near-term earnings volatility created by the current sustained low interest rate environment," Gregory Norwood, First Niagara Chief Financial Officer, noted. "This transaction, combined with the prepayment of approximately $5 billion in long-term borrowings executed as part of the HSBC branch transaction earlier this quarter, also meaningfully improves our funding profile and capital ratios."

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with nearly 430 branches, approximately $35 billion in assets, $28 billion in deposits, and approximately 6,000 employees providing financial services to individuals, families and businesses across Upstate New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.